The South African skin industry finds itself at a critical juncture. Due to Rift Valley Fever, stock theft and jackals, among many other issues, the number of sheep reaching our abattoirs has decreased significantly over the past 5 years. Unfortunately this trend does not appear to be reversing and we can only hope that the current slaughter numbers can at least be maintained.

From this reduced volume there are obviously 2 primary types of skins that then enter the market; each with their own unique properties.

Dorper skins have been, and continue to be, processed in South Africa to the pickle or wet blue stages for most months of the year. The value of a Dorper skin varies dramatically over the different seasons with different grades entering completely different markets. The fundamental driver for the value of Dorper skins emanates from the percentage of top grades that can be obtained. The number of these skins varies dramatically from both a seasonal and location perspective. These top grades provide the vast majority of the value for a parcel of Dorper skins as it is impossible to identify clean skins until the hair has been removed. The top grades are then largely sold to tanneries owned and operated by the major fashion houses (Gucci, Prada etc.) which must receive the skins in the pickle as the processing of these into leather varies dramatically based on each specific skin. The quantities of the top grades are extremely low; but since their value is so high the skins are handled piece-by-piece for processing through various wet blue or vegetable stages to create truly unique products.

Due to the limited (and very seasonal) quantities of the top grades, coupled with the highly specialised tanning that occurs, no international tannery could realise the full value of South African skins with local leather production. The remaining middle and lower grades of skins are again purchased by tanneries between Europe, Asia and the Middle East, each tanning and finishing to their specific requirements. If the full production of Dorper material were reverted to local production; not only is there absolutely no infrastructure to handle the quantity of South African skins; but the net value achieved for the leather would be incomparable to that achieved in the global markets. Obviously the losers would then be the abattoirs/farmers, already struggling in a market where volumes have plummeted, who would not achieve the correct value for their material.

Merino skins are once again unique in their marketability. There are only 2 primary markets for the tanning of Merinos worldwide, China and Turkey, with the vast majority of all skins eventually finding their way into the Russian market for the Russian winter. The tanning of Merino skins only makes sense if value-add can be obtained from the tanning process. This has been tried a number of times by South African tanneries but the net result is consistent. Due to the limited markets and tanning requirements of Merinos, the tanners in Turkey and China prefer to receive their skins drum salted and do not place any value on a processed skin. This requirement from the buyers, again coupled with the fact that no real tanning operations exist in South Africa to handle the Merino quantities slaughtered, drive the fact that skins are exported on the basis of obtaining the maximum value for the product.

In summary, unlike hides, due to the limited size and seasonal nature of the skin market in South Africa, it is highly unlikely that value can be added by processing this material further in South Africa. Obviously the South African hide and skin traders and tanners continue to support any local leather production that requires skins, but the growth potential in this area is limited due to the fact that the value behind the approximately 4 million skins slaughtered each year cannot be maximised in South Africa. Limited production can always be sold to local tanneries but the market prices for the majority of the material are far exceeded in the international markets based on customer demands. – [Tel: +27 (0)41 484 4591, email: gregf@capeproduce.co.za]

Steven Broughton, marketing director, African Hide Trading:

There is little sheepskin tanning done in SA because there is low demand for the sheep nappa and wool-on sheepskin due to the price of sheepskin leather goods and the South Africa’s climate. Basically there is no demand for winter jackets or high fashion nappa in volume.

Traditionally, most of the Dorper skins are used to make hair-off nappa for garments and footwear. These are exported to Italy, Turkey and China where there are tanneries which have the expertise to process our sheepskins all year round irrespective of the season.

The changing seasons affects the seed content of skins and hence the type of leather that can be produced. They use them to produce magical shrunken or pigmented leathers, which get rid of the pinhole and other damage on so many of the skins.

For many years African Hide allowed Exotan – at that time a sister company – to pick the Dorper skins it wanted from African Hide’s selection, and for a long time, Exotan did well with them.

But when the local market dried up, they tried to make nappa for the Chinese market, using French technicians, with technical help from France. Even with handpicked skins, they had piles of rejects by the time they gave up.

We are always willing to and have supplied the local market. The enquiries that we do get are in general for small volumes, and we supply at current market prices, after sorting and selecting to specifications. We’ve always offered the local market first choice.

If there was a viable market for sheepskin leather in South Africa, we’d be in it, but what do you do, as a business, if you get more from exporting pickled or raw skins than you could by processing it further? Obviously, you export pickled and raw skins.

My view is that South Africa lacks the expertise to process Dorper skins, and that there isn’t a market – domestic or export – which would make it worthwhile to try.

On the Merino side, there’s a small local market. They take a few hundred skins here and there and we supply selected skins to their specifications. – [Tel: +27 (0)41 405 7000, email: steveb@aht.co.za]

Until the 1990s, Exotan was a major sheep nappa producer. Jerome Ingenhoes explains what happened:

Up to the 1990s, there was a strong local market making leather jackets, and we based our Dorper nappa business on that. We had 30 or 40 clothing customers in Jo’burg alone, and I would spend weeks there. When that declined – it’s all gone now – we exported the leather, and that was also very successful for a period of time.

Looking back, the problem became that we couldn’t compete with the high fashion finishes coming out of Europe at the top end, and with India, China and Pakistan at the bottom. In the end we had to discount to get the business.

Our cost structure was against us – labour and skins were almost 50% each. Piece work payment structure would have been a much more efficient wage system.

Processing Merino in South Africa was never very successful. Wool-on slippers are a small market. On the fashion stuff, the margins are high but you have to work correspondingly more on the product.

On the more medium market, you’d be up against a company in China like Henan Prosper Skins & Leather Enterprise Co., which has the capacity to process 15 million skins a year. It claims to be the world's largest wool-on lamb and sheep skin tannery and manufacturer, but there are probably others of a similar size. – [Tel: +27 (0)41 396 9100, email: jeromei@iafrica.com]